Telesat sides with SES against Intelsat’s request for more C-band money

WASHINGTON — Telesat and SES are urging the U.S. Federal Communications Commission to reject Intelsat’s request for a larger share of the $9.7 billion in incentive payments the FCC plans to offer satellite operators to hasten the clearing of C-band spectrum the United States wants to repurpose for 5G cellular networks.

The FCC plans to use proceeds from an upcoming C-band auction to incentivize satellite operators to vacate the spectrum two years ahead of a 2025 deadline. Auction proceeds would also be used to reimburse the cost of new satellites and ground systems the operators will need to keep serving C-band customers while yielding 300 megahertz spectrum to companies building out U.S. 5G networks.

Under a proposal the FCC released Feb. 7, Intelsat would be entitled to the largest share of incentive payments. Intelsat has since asked the FCC to increase its potential $4.85 billion share of the $9.7 billion to at least $5.8 billion, arguing that a 60-67% share is more in line with how much work Intelsat needs to do to clear its swath of C-band by the end of 2023.

Late last week, Eutelsat took Intelsat’s side while submitting its own claim for nearly $1.5 billion of the incentive money, or about three times more than the 5% share the FCC has proposed setting aside for the Paris-based operator.

Giving Intelsat and Eutelsat a combined $7.5 billion or more of the $9.7 billion would come at the expense of SES and Telesat, who united this week in a bid to preserve the FCC’s proposed payment allocations. Those allocations could be worth $4 billion to SES and nearly $375 million to Telesat.

In a joint letter the FCC released Feb. 25, SES and Telesat said that Intelsat’s justification for seeking more than the offered 50% share of the $9.7 billion is not valid.

While Intelsat now says it previously underestimated the amount of work needed to clear what it calls an outsized share of North American C-band spectrum, SES and Telesat say that the scope of work hasn’t changed since all three firms and Eutelsat jointly commissioned a study to assess the effort they each face in making way for 5G.

That study, undertaken as part of the C-Band Alliance that Intelsat, SES, Eutelsat and Telesat formed in 2018 to push for a private auction, was the basis for deciding how alliance members would divide a much larger share of auction proceeds than they stand to reap under the public auction.

SES and Telesat say the FCC shouldn’t believe Intelsat’s argument that the study underestimated its share of the work involved in clearing the spectrum.

The FCC is scheduled to vote on its C-band auction plan Feb. 28. In addition to $9.7 billion in incentive payments, satellite operators stand to receive an estimated $3 billion to $5 billion — and possibly more — to cover costs associated with ordering replacement satellites, reducing their number of C-band gateways, installing signal filters, replacing C-band dishes and adopting new signal compression technology.

Although SES argued in a letter to the FCC last week that it deserves the same share of “accelerated relocation payments” as Intelsat, SES said this week it is not seeking any incentive money beyond the 41% share outlined in draft auction plan. Telesat, which would get about 4% of the incentive money under the draft plan, also told the FCC it’s not seeking a larger share

In their joint letter, SES and Telesat urge the FCC “to hold fast” to the draft auction plan’s “core elements” by refusing to increase any company’s share of incentive payments. If the FCC sticks with its original allocations, 50% of the incentive payments would go to Intelsat while 41% would go to SES. The remaining 9% would go to Eutelsat, Telesat and Embratel Star One.

Eutelsat, in aligning itself with Intelsat, told the FCC in letter released Feb. 21 that Intelsat deserves 62.6%, or $6.07 billion, of the proposed incentive payments and that Eutelsat should get up to $1.47 billion — triple what the FCC included in the draft plan. Eutelsat, which quit the C-Band Alliance last year, urged the FCC to accommodate these higher allocations by reducing SES’s share to 22.1%, ($2.15 billion), Telesat’s share to 0.12% ($11.2 million) and Star One’s share to 0.03% ($2.7 million).

The scramble for incentive money spilled into the open last week when Intelsat broke ranks with SES and Telesat by making an independent appeal for more money and telling the FCC that the C-Band Alliance was effectively dead. Intelsat’s move came shortly after a hedge fund assumed a 7% stake in Intelsat and urged the company’s board to either fight for a bigger share of the C-band money or file for Chapter 11 bankruptcy protection.

Telesat and SES, meanwhile, say the C-Band Alliance still exists and that Intelsat doesn’t have the right to unilaterally withdraw from the group.

An Intelsat spokesperson said the C-Band Alliance was effectively null and void once the FCC denied the group’s request to conduct a private auction.

“In our recent FCC filing, we detail that, from its inception, the C-Band Alliance was established solely to advocate for a market-based solution to clear C-band spectrum” Dianne VanBeber, Intelsat vice president of investor relations, said in a Feb. 26 statement. “The existence of the CBA was obviated by the FCC decision to pursue a public auction. This is further emphasized by the draft order, which does not contemplate a meaningful role for the CBA, and thus the existence of the C-Band Alliance has run its natural course.”